Pricing Methods and Price adaption strategies
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This document discusses various pricing methods and strategies for price adaptation. It describes markup pricing, target-return pricing, perceived-value pricing, value pricing, going-rate pricing, and auction-type pricing. It also covers price adaptation strategies like geographical pricing, discounts/allowances, promotional pricing, and differentiated pricing. The document is a presentation that was created to discuss pricing methods and price adaptation strategies with key details about calculating prices using different approaches.
Pricing Methods and Price adaption strategies
- 1. Pricing Methods and Price adaption strategies 1 1 Presented By:- DharmjitSinh Jadeja Enrollment No:- 18SOMBA21012 Presented to:- Pro. Nirav Mandavia
- 2. Table of content • What is price – Page no.3 • Methods of pricing – Page no.4 • Markup Pricing – Page no.5 • Target-return pricing – Page no.6 • Perceived-value pricing – Page no.8 • Value pricing – Page no.10 • Going-rate pricing – Page no.11 • Auction-type pricing – Page no.12 • Price adaptation – Page no.14 • Geographical Pricing – Page no.16 • Discounts/Allowances– Page no.17 • Promotional Pricing– Page no.18 • Differentiated Pricing– Page no.19 1 2
- 3. What is pricing • In Simple Sense “Price is the amount of money charged for a product or a service”. • As per PHILIP KOTLER “Price is the sum of all the values that customers give up to gain the benefits of having or using a product or a service”. • Price is the only element in the marketing which produces revenue; all other elements represent cost. 1 3
- 4. Pricing methods •Markup pricing • Target-return pricing •Perceived-value pricing • Value pricing •Going-rate pricing • Auction-type pricing 1 4
- 5. Markup pricing The Mark-up pricing is the method of adding a certain percentage of a markup to the cost of the product to determine the selling price. 1 5
- 6. Target-return pricing The Target-Return Pricing is a method wherein the firm determines the price on the basis of a target rate of return on the investment i.e. what the firm expects from the investments made in the venture. Here, the firm calculates the amount invested in the business activities and then determine the return they expect from these assuming a particular quantity of the product is sold. 1 6
- 7. Formula Target-Return Pricing = unit cost + (desired return x invested capital) /unit sales 1 7
- 8. Perceived-value pricing In Perceived-Value Pricing method, a firm sets the price of a product by considering what product image a customer carries in his mind and how much he is willing to pay for it. 1 8
- 9. Example Price is Rs.7,199Price is Rs.1,11,900 1 9
- 10. Value pricing Under Value pricing method companies design the low priced products and maintain the high-quality offering. Here the prices are not kept low, but the product is re-engineered to reduce the cost of production and maintain the quality simultaneously. 1 10
- 11. Going-rate pricing GOING-RATE PRICING The Going-Rate Pricing is a method adopted by the firms wherein the product is priced as per the rates prevailing in the market especially on par with the competitors. This type of pricing is mostly followed in Oligopolistic industries where they deal in homogenous goods, and in which less variation is seen from one producer to another. 1 11
- 12. Auction-type pricing Auction-type pricing method is growing popular with the more usage of internet. Several online sites such as eBay, Quiker, OLX, etc. provides a platform to customers where they buy or sell the commodities. 1 12
- 13. Types of auction 1. English Auctions- There is one seller and many buyers. The seller puts the item on sites such as Yahoo and bidders raise the price until the top best price is reached. 2. Dutch Auctions- There may be one seller and many buyers or one buyer and many sellers. In the first case, the top best price is announced and then slowly it comes down that suit the bidder whereas in the second kind buyer announces the product he wants to buy then potential sellers competes by offering the lowest price. 3. Sealed-Bid Auctions- This kind of method is very common in the case of Government or industrial purchases, wherein tenders are floated in the market, and potential suppliers submit their bids in a closed envelope, not disclosing the bid to anyone. 1 13
- 14. Price adaptation • Price adaptation is the ability of a business to change its pricing models to suit different geographic areas, consumer demands and prevailing incomes. Marketing plays a significant role in price adaptation because pricing strategy is one of the four main components in determining product positioning, which is how a company chooses to present products to consumers and generate interest. The more adaptability a business has, the better chance it has of appealing to more consumers. 1 14
- 15. Price-Adaptation Strategies •Geographical Pricing • Discounts/Allowances •Promotional Pricing • Differentiated Pricing 1 15
- 16. Geographical Pricing Geographical pricing is adjusting an item's sale price based on the buyer's location. Sometimes the difference in sale price is based on the cost to ship the item to that location or what the people there are willing to pay. Companies will try to maximize revenue in the markets in which it operates, and geographical pricing contributes towards that goal. 1 16
- 17. Discounts/Allowances • Pricing Allowance The purpose of giving allowances or discounts is to tackle competitors. However, discounting can be dangerous if not controlled properly. • The types of discounts being offered fall in the categories below: 1. Cash and settlement discounts 2. Quantity Discounts 3. Promotional Discounts 1 17
- 18. Promotional Pricing • Price promotions or promotional pricing is the sales promotion technique which involves reducing the price of a product or services in short term to attract more customers & increase the sales volume. • Sometimes buy one get one free scheme is used. • Example: - • Buy one get one free • Sale with 20% or 30% off etc. 1 18
- 19. Differentiated Pricing • Companies often adjust their basic price to accommodate differences in customers, products, locations, and so on. Price discrimination occurs when a company sells a product or service at two or more prices that do not reflect a proportional difference in costs. • In first-degree price discrimination, the seller charges a separate price to each customer depending on the intensity of his or her demand. • In second-degree price discrimination, the seller charges less to buyers who buy a larger volume. • In third-degree price discrimination, the seller charges different amounts to different classes of buyers. 1 19
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